Financial Risk Manager Part 2

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An external auditor is reviewing the modeling processes used by a US-based bank to model operational losses as part of the bank's capital planning process. Using guidelines set by the Federal Reserve with respect to capital planning, which of the following processes or assumptions would the auditor find most appropriate?

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Assuming a high positive correlation between operational loss severity and equity index movements during normal market conditions

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Using a net charge-off model to predict shorter-term credit losses and a roll-rate model to predict losses over a longer time horizon

Modeling operational losses by projecting an annual loss estimate and then evenly distributing the losses across the four quarters of the year

Incorporating forward-looking factors and idiosyncratic risk exposures into stressed operational loss estimates